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The last two decades have witnessed an explosion in the power and capabilities of ordinary computers and information technology equipment in general. Even more interesting, however, is the fact that, between 1960 and 1990, the price of computing, or processing power, in the US shrank in real terms by a factor of 6000 (Economist, 1991, p.30)1. Getting more computing power for less money has not escaped the interest of US business enterprises. In 1970, information technology equipment accounted for 11% of all durable equipment purchased by private enterprises; by 1989, that figure had risen to 51% (Economist, 1991, p.30).

Unfortunately, it has been difficult to establish whether the extent of such investments in information technology has resulted in any realized cost savings or any increase in labour productivity. Existing empirical studies of the relationship between information technology deepening and labour productivity have yielded conflicting results. At the aggregate level, Oliner and Sichel (1994) find that information technology does not make a significant contribution to output growth. Using industry level data, Morrison and Berndt (1991) find that computing technology has had only a very small impact on technical progress. In another study, Morrison and Berndt (1992), find that, in most industries, integration of processing power is uncorrelated with multi-factor productivity. Parsons, et al (1993) report very low returns for information technology investments for Canadian banks.

Bibliography Citation

Gius, Mark Paul and Wendy Ceccucci. "The Impact of Information Technology on Labour Productivity in the Service and Trade Sectors of the USA." Briefing Notes in Economics 45 (June/July 2000): 1-6.